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The speculation is over. The rate of GST will be increased from 12.5% to 15% as of 1 October 2010.

The GST rate increase is consistent with Government’s commitment to a fairer tax system and a move away from personal and company tax rates that it considers harmful to economic growth.

Over the next three months (and beyond) we’ll be working hard to guide our clients through the various changes that need to be implemented as a result of the GST rate increase, some of them complex.

As always, taxation changes do present opportunities along with the usual challenges, so now is the time to consider those opportunities along with the raft of administrative changes you’ll need to consider.

New Tax Fraction
At the moment, with a GST rate of 12.5%, calculating the GST component of a GST inclusive price is as simple as dividing by 9.

Not so simple after 1 October. When GST increases to 15% you’ll need to multiply by 3 then divide by 23.

For example: Let’s assume the price of an item is $1,000 plus GST, so that’s $1,150 including GST. The GST component is $1,150 x 3 ÷ 23 = $150.

It is a time to work smarter, not harder, inside your business. Every system you have (both computerised and manual procedures) within your business needs love. Efficiency is king in this belt tightening age.

With the GST rate changing from 12.5% to 15% on October 1st we suggest taking a look at your accounting software or tool and checking out what you need to do now to make it through the change over.

If you are rolling a software program on your hard drive consider that: “They only have a few months to make the change, burn it onto a CD, put it in a box (made from trees), put the box on a boat or plane, courier it to the store, where you can drive down to pick it up, then install.” This is a snippet from a sweet little post on the Xero Blog. These guys have been through two VAT changes in the UK, hiccup free.

We strongly suggest you sort it out soon. Check out what you need to do for your existing system or better still take the time to check out Xero. You can TRY XERO FOR FREE to get a taste of this savvy little tool.

The Crunch team loves Xero and loves talking about Xero so if you have questions please don’t hesitate to drop us a line or give us a bell.